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Shrink from shoebox apartments

[SIZE="1"]Thanks to the affordable prices and good profit record, studio units tend to be the first to be sold out in most projects. One of the shoebox units which have fetched high prices is a 484 sq ft one at the [email protected] Merah which sold for $1,280 per sq ft, or $620, 000, last September. -- ST FILE PHOTO[/SIZE]

There is a Foochow fishball noodle stall at a Zion Road coffee shop that I used to patronise regularly as it was near my office. While the noodles lacked the springiness of, say, the Pontian version, the fabulous fishballs - stuffed with minced cuttlefish and fish fillings - more than made up for it. For $3 a bowl, you got a decent serving of noodles plus six fishballs of various varieties.

My patronage dropped sharply in 2002 when my office moved from Kim Seng Road to Toa Payoh North. There were the occasional visits when I needed to satisfy my pangs for Foochow fishballs but over time, they grew less frequent. After a while, they stopped.

A few months ago, I dropped by for a meal as I was in the vicinity. The taste was as good as I remembered it and the price remained the same. But to my dismay, the portion had shrunk visibly and I got two fewer fishballs than before. And this was before the recent hike in the prices of key ingredients like wheat flour. Does the proprietor now serve one fewer fishball, I wonder?

The shrinking fishball conundrum reminds me of the state of our residential market.

It never fails to amaze me how popular shoebox units have become with home buyers.

Shoebox units are generally defined as apartments below 500 sq ft but in today's market, many are significantly smaller.

The smallest apartments in Singapore can be found at the [email protected], a boutique development. The smallest unit is all of 258 sq ft, the size of a hotel room. Nonetheless, the project was a sell-out.

Do the buyers and others who bought similarly small units elsewhere know what they are getting into? Perhaps not.

I believe the over-exuberance over shoebox apartments is one reason for the recent push, by the authority that oversees private housing, for greater transparency among developers in depicting their showrooms when selling uncompleted homes.

For the uninitiated, new homes in Singapore are sold off the plan. But unless you are an architect or skilled in technical drawing, it is hard to visualise the house from merely looking at a floor plan. Hence, developers build showrooms to help prospective buyers see the unit in the right perspective.

However, some developers and their interior decorators have resorted to smoke and mirrors in making their showrooms seem larger than their actual sizes.

This usually involves removing structural walls and pillars, raising ceiling heights and straddling furniture between living room and balcony.

If the Urban Redevelopment Authority's drive towards greater transparency is realised, buyers can then see for themselves the actual layout of the apartment at the showroom.

This is important as more and more greenhorns enter the market.

According to a recent Savills findings reported in The Business Times last week, an increasing number of Housing Board dwellers are buying shoebox apartments.

These buyers have grown exponentially, from caveats for 59 units lodged in 2006 to 1,016 last year, exceeding the 857 shoebox units bought by those who live in private homes.

I am not debating the merits of shoebox homes.

Indeed they may become one of the mainstays of future living as households shrink and a rising number of people choose to live alone.

But I urge caution against passively accepting smaller and smaller space. At what point do we say enough is enough? Must we accept cramped housing as the de rigueur of modern living with nary a peep?

At my favourite Foochow fishball stall, it used to be six fishballs in a bowl of noodles. Today it's four. Will it become two tomorrow?

Will a day come when the noodles are served with no fishball at all and the signage is changed to Foochow noodles instead of Foochow fishball noodles? I would rather he increase the price than cut further.

Many developers these days are like the noodle seller. Some have gone further. Not only have they reduced the size of homes but they have also increased prices.

An acquaintance who bought a shoebox unit in a new project somewhere in Serangoon Road was taken aback when he saw the size of his flat after getting his keys early last year.

He bought it as an investment but has since found it hard to rent it out as potential tenants were put off once they stepped into the claustrophobic space. Last I heard, the unit has remained vacant.

As more and more such sub-sized shoebox units are completed, there is some concern that a similar fate awaits them. If ordinary tenants don't find such housing conducive for long-term stay, will the owners resort to renting out to all and sundry on short leases? What kind of tenants might these be?

On the other side of the coin, some people have argued that Singapore is heading the way of Hong Kong and New York, where people generally have accepted cramped quarters of as little as 200 sq ft to 300 sq ft as a way of life.

Furthermore, who am I to question sub-sized units when the market positively demands it?

Thanks to their affordable price quantum and good profit record, studio units tend to be the first to be sold out in most projects.

Even the much-criticised small units at [email protected] have made profits for their buyers.

A check of some recent caveats showed that some initial buyers have already pocketed profits in the sub-sale market. For instance, a third-floor unit bought in November 2009 at $1,475 per sq ft (psf) was resold in January this year at $1,637 psf, earning the investor a gross profit of $41,796.

Assuming he had paid 40 per cent of the purchase price of $380,550 (payment schedule is based on stages of completion of the project), this works out to a return of 27 per cent in little more than a year.

But with the introduction of the latest cooling measures in the form of heftier sellers' stamp duty and bigger down payment, the sub-sale game is all but over.

So if you are still bent on investing in a shoebox unit based on its floor plan, I suggest that you lower your expectations. And when you are handed the keys, lower them further.

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[B]Tenants shun CBD’s shoebox apartments
By Anne Gibson 5:00 AM Tuesday Nov 1, 2005
[/B]
One investor in the Altitude block has been unable to get tenants since June, despite slashing the rent. Picture / Brett Phibbs (For a map of where to buy or not to, click on 'more pictures' below.)Vacancy rates in Auckland’s inner-city apartments are rising and rents are dropping, leaving some investors’ family homes at risk.

About 1500 of the city’s 11,500 units are empty, unable to draw tenants even at rock-bottom rents, says a report by property-market analyst Kieran Trass of Hybrid Group and Leonie Freeman of Interactive Property Management.

"That’s a 13 per cent vacancy rate which is astronomical - I would have expected a 5 per cent vacancy rate," Mr Trass said.

"We’re one of the largest players in the business and we’ve only got 40 units to let," Mr Dunn said, although he agreed rents had fallen.

Mr Trass reckoned it would take at least 2850 tenants to fill the empty units, which are mainly new and tiny studio, one- and two-bedroom flats on the CBD’s fringes.

Hardest hit are the student-style units in the Hobson, Nelson and Cook St areas where Mr Trass predicts rents will continue to plummet.

"The short-term view for Auckland’s CBD apartment market over the next few years looks grim," he said, predicting that many would stay empty for the next five years.

One Timaru investor who paid $212,000 for an Altitude unit on the corner of Hobson and Kingston Sts had been searching for a tenant since June, having been told he could expect $500 rent a week, Mr Trass said. He dropped that to $265 a week and still the unit was empty.

"He’d be lucky to sell it for $150,000 now," Mr Trass said.

Many investors had borrowed against all the equity in their own home, so rising vacancies and falling rents could force them to sell those homes and become tenants themselves, he said.

"Their dreams will have become a nightmare - they pay maybe $5000 to $10,000 a year on the loan."

Tenants are also quicker to leave, the Trass-Freeman report says.

In 2003, they stayed an average 19 months but now they stay 10 months, and they want incentives such as a week’s free rent.

Rents will rise only in the better-located top-quality apartments which tend to dominate the waterfront area. The report praises Auckland City for banning shoebox units which "currently dominate the oversupply of apartments".

But it says the long-term outlook is "ironically" sound due to the trend for more people to occupy the CBD.

Auckland City’s central area planning manager, Vijay Lala, said this could prompt owners to enlarge apartments by amalgamating neighbouring flats to create one attractive unit.

"I’m keen to see the economy of the CBD thrive and a lot of that has to do with people living in the CBD, so high vacancy rates are undesirable."

The council was still getting weekly applications from developers to build apartment blocks, often of more than 50 units. But the report had vindicated moves by the council on June 3 to ban smaller units.

Developers are banned from building studio units under 35sq m, one-bedroom units under 45sq m, two-bedroom under 70sq m and three-bedroom under 90sq m.

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Went to visit a friend's place in Upper East Coast studio unit. Mind you, this is an old studio unit and hence much bigger than the ones they are churning nowadays. At 550sqft we already felt rather claustrophobic.

Anyway, it is a lifestyle choice. No right or wrong about it. Perhaps this is the way to go as Singapore's population increases.

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Alamak, NZ is 383 times of Sg land mass with about the same no of population of 4mil plus... How to compare!?!

Y not some guru here use Hk to gauge!!

at the same time, you cant compare the situation here with HK
only in sg will you have more than 80% of the population living in pretty high quality and well located (heavily subsidised) public housing.

only if ALL developers come together and ONLY provide shoebox apt then the buyers have no choice but to buy/rent shoebox.

but the biggest landlord cum developer keeps churning out 3-5 bedders flats for residents at cheaper prices, and yet also allow them to rent out for yield ...

if im a poor blue collar foreign worker coming to sg.. i have 2 choices:
1.) a big HDB flat i can co rent with other compatriots or i can bring my family over to stay in.
2.) a tiny shoebox apt

if im a rich/ultra wealthy foreigner coming to sg .. i have multitude of choices, but shoebox will never even be an option for me ...